The Human Face Of Insurance

Insurance products are complex. Consumers are often bewildered by a wide range of policy options, the technical language and a lack of transparency. At the same time, insurance companies are perceived all the same in consumers’ eyes, with price being the major and possibly only differentiator. This is the status quo, but consumers always want more.

The vicious circle of insurance

Most people don’t understand insurance. They procrastinate and don’t think about it until they need the coverage. The complexity of insurance creates frustration and mistrust in the sector, making consumers even more reluctant to sign up to new policies. This becomes a vicious circle that negatively affects the communication and relationship between consumers and insurers.

Complex products deter consumers

In insurance, product complexity is number one enemy of recruiting customers. As people don’t understand the product, they do not feel in control and are unsure whether they are making the right choice. Therefore, in order to recruit them, they need to be reassured constantly that they are doing the right thing.

Customers find general insurance a complex matter. Filing complaints, understanding different insurance policies, and comparing insurers are the top sources of complexity and irritations for people. Other data suggest that over 60% of customers do not know or understand the details of their policies, and just over 35% of them think they do.

People don’t know what they'll need in the future

As insurance policy involves many variables concerning the future, people always find it difficult to gauge what their needs will be. It’s because humans tend to think about the present or what is already known. At these moments, they need advice and support to make better decisions.

It’s difficult for people to pick the “right” insurance policy, because that requires an accurate and sophisticated understanding of one’s own needs. They don’t really know whether they have made the right decision until they make a claim. Therefore, a lack of clarity in how insurers handle claims is the biggest cause of customer dissatisfaction. Hence, it is also the top reason why customers switch insurers.

Complexity causes misremembrance

When people process complex information, they remember only some parts of it. It is because the brain naturally deconstructs complex information into smaller components, and focuses on the components that are close to our personal situation or current necessity, or the components that are easier to understand. This is how our brains are wired. Due to this automatic mental screening process, people tend to remember only parts of the insurance policy and some of the reasons why they sign up.

Customers find combined policy more confusing than standalone insurance package. In a combined policy, the terms and conditions of individual covers are usually not simplified, resulting in a much longer and complex contract. On the other hand, when simplifying policies, another interesting customer dynamic comes into play: the level of trust in the company, the length of the contract and the level of detail that it includes.

Life events change insurance needs

Insurance needs evolve with life events and life-situation changes. These could be people having a baby, taking care of an ill parent, a relocation or a divorce. When people are still in the middle of these changes or in emotional distress, they unlikely realise what these events mean for their insurance policies. However, some of the new needs are likely not covered, and they don’t realise it until the moment they need the coverage, which is always too late.

During a significant life-situation change, a quarter of customers forget to communicate with their insurer on time.

People don’t think about insurance

Most people think about insurance only when something goes wrong. At this moment, they desperately try to contact the insurer, without much knowledge about the insurer and the products it offers. As the customers are in emotional distress, they usually expect the insurer to understand their needs, to show it can truly help them through the storm, and to be flexible in meeting their needs.

In normal times, most people do not think about insurance. Insurance comes to mind when something bad happens, when personal circumstance changes significantly, or when anxiety about personal or family situations increases.

Simplicity, flexibility, support and reassurance

Complexity and emotional distress are the enemies of rational behaviour. People think about insurance only when they need it, and when the coverage does not fully meet their needs or expectations. From the consumer perspective, the insurer is responsible for people’s wrong policy choices and their lack of information about the coverage. They expect the insurer to understand their needs, especially in times of distress, and offer policies and services that are as simple as possible, provide flexibility to meet their ever-changing needs, and provide relevant support and reassurance that the decision they’re making is the best for their situation.